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  • Meeting of the OECD Councilat Ministerial Level

    Paris, 7-8 June 2017

    UPDATE REPORT 2017 - INCLUSIVE GROWTH

  • Update Report 2017 - Inclusive Growth

  • 2

    TABLE OF CONTENTS

    EXECUTIVE SUMMARY ............................................................................................................................. 5

    INTRODUCTION ........................................................................................................................................... 8

    CHAPTER ONE ............................................................................................................................................ 11

    THE ISSUE: THE RISE OF INEQUALITIES ............................................................................................. 11

    1.1 Income inequality has risen or remained persistently high in most OECD countries, whilst falling

    in several emerging economies, though from significantly greater heights ........................................... 12 1.2 Wealth in the OECD is much more unequally distributed than income .......................................... 15 1.3 Living standards of the poor are trailing behind .............................................................................. 16 1.4 Inequalities in the OECD countries extend far beyond income to touch many vital areas of life .... 18 1.5 Inequalities tend to cumulate throughout an individuals life and to tend to frame the opportunities

    of the next ............................................................................................................................................... 19 1.6 Inequalities in OECD countries have a profoundly spatial dimension ............................................. 25

    CHAPTER TWO ........................................................................................................................................... 27

    UNDERSTANDING THE RISE IN INEQUALITIES: DRIVERS AND CONSEQUENCES .................... 27

    2.1 Understanding the drivers of increased inequalities ............................................................................ 28 2.1.1 The role of fiscal redistribution is vital for reducing market income inequality ........................... 28 2.1.2 Globalisation has increased the difficulty for governments in taxing mobile capital income ....... 30 2.1.3 Globalisation and digitalisation might have impacted wage inequality and productivity growth 31 2.1.4 Financialisation has had several important impacts on market income inequality ....................... 36

    2.2 Inequalities have multiple consequences ............................................................................................. 39 2.2.1 Income inequality may impact productivity and economic growth .............................................. 39 2.2.2 More unequal regions grow less .................................................................................................... 40 2.2.3 Rising inequalities may pile further pressure on public social budgets, though more work would

    be needed to exactly assess these effects ................................................................................................ 40 2.2.4 High inequalities may also be hindering trust and constraining governments capacity to act ..... 41 2.2.5 Further research efforts are needed to understand the drivers and consequences of inequalities . 42

    CHAPTER THREE ....................................................................................................................................... 43

    POLICIES FOR INCLUSIVE GROWTH .................................................................................................... 43

    3.1 Enabling People to Create Prosperity and Flourish in a New World ................................................... 44 3.1.1 Coherent education and skills policy interventions across the life-course can serve to furnish

    individuals with capacity enhancing assets, putting in place the enabling conditions for success ........ 44 3.1.2 Policy needs to ensure that good health is an asset that everyone can draw on throughout their

    lives ........................................................................................................................................................ 49 3.1.3 It is essential that fiscal policy is properly designed to support people ........................................ 51 3.1.4 Governments also have an important role to play in helping people to adapt to change and stay

    engaged in the labour market ................................................................................................................. 53 3.1.5 Any focus on labour markets must also prioritise reducing the gender gap and promoting the

    integration of women in economic activities ......................................................................................... 58

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    3.1.6 Setting up comprehensive policy approach to prevent ageing unequally ..................................... 61 3.2 Giving All Businesses the Chance to Thrive ....................................................................................... 61

    3.2.1 Policies need to target the revival of business dynamism ............................................................. 61 3.2.2 Policy needs to focus on addressing skills mismatches to boost productivity growth .................. 63 3.2.3 Governments also have an important role to play in investing in and incentivising research and

    development (R&D) ............................................................................................................................... 63 3.2.4 Special attention needs to be paid to supporting SMEs access to financing ................................. 65 3.2.5 As part of efforts to create a level playing field for firms and foster inclusive growth,

    governments need to promote more equitable financial markets that also serve to channel resources

    into productive activities ........................................................................................................................ 65 3.2.6 Promoting business dynamism is essential to inclusive growth, but it is not sufficient, as it needs

    to be accompanied by comprehensive action to mitigate trade-offs ...................................................... 66 3.3 Governance and Implementation ......................................................................................................... 67

    3.3.1 To be inclusive, growth must improve the performance of all regions, cities and neighbourhoods,

    including those lagging behind............................................................................................................... 67 3.3.2 Ultimately, the pursuit of inclusive growth will require a whole-of-government approach that

    aligns vision, incentives and delivery mechanisms throughout the policy-making process .................. 70 3.3.3 Strengthening global governance of the borderless economy is essential to fostering inclusive

    growth .................................................................................................................................................... 73 3.3.4 The designing of inclusive growth policy strategies will ultimately have to be country-led ........ 75

    ANNEX ......................................................................................................................................................... 77

    OVERVIEW OF RECENT, ONGOING AND PLANNED ACTIVITIES SPECIFIC TO INCLUSIVE

    GROWTH ..................................................................................................................................................... 77

    REFERENCES .............................................................................................................................................. 82

    Figures

    Figure 1. Income inequality has widened in a majority of OECD countries over the last two decades13 Figure 2. Average household disposable incomes are still below pre-crisis levels in a third of OECD countries ............................................................................................................................................... 14 Figure 3. Poor households were strongly hit by the crisis .................................................................... 14 Figure 4. Wealth is highly concentrated in the hands of the top 10%................................................... 15 Figure 5. Rich households in savings.................................................................................................... 16 Figure 6. The quality of life of the poorest households has declined or stagnated in a number of OECD countries since the mid-1990s ........................................................................................................ 17 Figure 7. The gains to increase longevity have not been shared equally .............................................. 19 Figure 8. Parents' education has a strong influence on child educational outcomes ............................. 22 Figure 9. Some countries have higher proportion of students who were able to overcome their disadvantages ............................................................................................................................................. 24 Figure 10. Outcomes for one generation frame the potential of the next............................................ 24 Figure 11. Many OECD countries see large divides between cities and regions ................................ 25 Figure 12. The welfare state plays a crucial role in redistributing market incomes in OECD countries, but is less prominent